But the eye-popping spending is part of a long-term bet on one of the company’s biggest strengths, Michael Graham, managing director and senior internet analyst at Canaccord Genuity told CNBC’s “Closing Bell” on Monday.
“The company is actually trying to manage down the amount of content that it’s licensing from other people,” Graham said. “The plan there really is to draw subscribers to the service with content that Netflix builds and produces on its own, and that Netflix owns and doesn’t have to pay royalties on. So what that does is it enables margins to expand over time.”
Series like “Stranger Things,” both produced and owned by Netflix, represent the content that will distinguish Netflix, thanks to
For instance, the company’s earnings release featured search queries for its original content, showing which big launches are drawing interest from users:
That’s important as companies like Amazon, Hulu and HBO double down on their own original content.
“It’s becoming an arms race,” said eMarkter senior analyst Paul Verna. “There’s so many more parties that are competing for content and are bidding up the prices.”
Still, some analysts are not as optimistic
“The problem that Netflix has compared to other competitors is Netflix doesn’t have any other business to leverage against,” Verna said.
— With reporting by CNBC’s Michelle Castillo
